CBH is embarking on a new era of growth, maintaining market share and keeping grain on rail for its growers.
These were the key messages CBH management passed on to 200 growers at its annual general meeting on Monday.
Chief executive officer Andrew Crane and chairman Wally Newman told growers that providing these outcomes would not be without challenges, despite having just delivered two of the strongest consecutive years for the co-operative in its history.
Among the measures to allow CBH to grow and grow in the right places will be the use of a new system for maintenance and upgrade, Dr Crane said.
The Supply Chain Optimisation (SCO) project, while in its early stages, will be unique to CBH as it highlights the least-cost pathway from paddock to port for growers.
“We’ve got to weigh up what is good for our growers’ back pocket,” he said.
“We’ve been doing a deep analysis modelling of how to run the supply chain more effectively and we’re taking those results to the board.
“Growers should take confidence that we are taking the principle that the whole supply chain is the most important.
“In the past we’ve used people who’ve worked their entire lives within our network to manage this but now there is technology available that can make this decision with a more cost effective approach in mind.”
Mr Newman said SCO wouldn’t automatically shut bin sites down due to a “phase in” period and expected that new sites may emerge as priorities.
“There’s four bins in my area that we only open if necessary,” he said.
“We don’t close them, we only open them on a year where it’s going to be beneficial.
“And some of them will be phased out evenutally anyway, whether it’s 10, 20, 30 or 50 years.
“The design of the computer program calculates where the bins should be based on locations of our growers and their needs.”
The injection of competition into the WA market through the growth of Bunge drew the concern of growers at the AGM, with several raising the issue during question time.
Among the concerns raised was CBH’s plans for the low production years, where market share will come into play as CBH attempts to fill a shipping schedule.
Dr Crane said competition was healthy and good for CBH as it looked to sharpen its strategies and better highlight its grower benefits.
“Today I made the case that the growers need to look at the whole picture,” he said.
“When growers arrive at a bin they can opt to sell to one of many marketers, they can quality optimise their grain, they can put it into storage for free for the year.
“There’s a lot of value in delivering to a CBH site other than the grain price.
“They are going to be presented with other options and we understand that so we need to offer them a very clear value proposition.”
CBH Board stability also drew hard questioning from attendees, forcing Mr Newman to stand behind his board, which now includes new District 5 director Simon Stead and the re-elected John Hassell from District 3 and Brian McAlpine from District 5 following the recent elections.
Criticism came in the form of a “leaking board” and disharmony among directors, particularly in the wake of independent director Samantha Tough’s resignation late last year.
“I absolutely agree with you that there’s no excuse for any confidential information getting out of the board room,” Mr Newman said.
“I can assure you that the board is operating better than I’ve ever seen it.
“The directors are just as concerned as you are and we’ve put stringent governance guidelines in practice.”
Mr Newman said the board would be growing shortly, with one independent director expected to join ranks “within the week” and a third hopefully in the near future.
Rail access and particularly the impact on roads since the closure of Tier 3 lines was addressed early in the meeting by Mr Newman and again raised during member questions.
He identified rail as being a priority for the co-operative into the future, an asset that was needed for the future of grain growers in WA.
Dr Crane said reports such as the Strategic Grain Network Review (SGNR) from 2009 and the current Rail Access Code were outdated as WA grain growers increased yields and pressure mounted on road infrastructure.
“We can’t run trains on gravel roads, we need to be able to access every inch of that rail network,” he said.
“By making the commitment to rail we’ve changed the dynamics from when the SGNR was made.
“If it hadn’t been for CBH investing in rail, the Tier 3 lines would’ve been closed much earlier.”
He labelled the closure of the lines based on claims by Brookfield Rail of the unviability of the routes as a “travesty” for growers.
“We will campaign strongly to have those lines open and we will use those lines,” Dr Crane said.
“We were running up to 6500 tonnes on those lines up until the day they closed and that grain needs to be on rail and not on road.”
Mr Newman said he believed the Government would eventually “come to the party”.
“I think there’s that much pressure out there that the growers will almost demand Tier 3,” he said.
“The pressure is coming onto the Government from more angles now, with Labor announcing they will open Tier 3 if they get re-elected.
“I believe the Government will come to the party and we will get a positive outcome.”
With the challenges highlighted throughout the meeting, Mr Newman and Mr Crane were also quick to point to the positives of CBH’s current position.
Following the reporting of a $149.2 million profit in 2013/14 with a record harvest of 15.9 million tonnes, it was outlined the 2014/15 harvest of 13.5mt would return an earnings surplus of $130m before rebates.